Succession Planning For A Family Business: A Leader Should Change From A Leader To A Mentor.
Conflicts related to the subsequent planning of an Indian family business can be resolved logically. Here's how.
Corona virus infection has increased the focus of the succession program as a potential risk that needs to be managed in a structured way to mitigate the impact of unforeseen events on businesses. Many business families are considering succession plans, and sometimes discussions have reached the board of directors.
Today, family business owners clearly realize the importance of succession planning, and acknowledge that the sustainability of their business depends not only on their vision but also on their wise choice of successor. Even in the planning of most Indian family businesses the process of hereditary planning is still unclear. Reluctance, procrastination and negligence are common among professionals when creating succession plans for business families.
Why do fast decision makers in family businesses skip planning for success? Looking at some of India's successes and failures, it is clear that the main problem is the confusion between the 'equal' and the 'fair' heirs. Equal distribution of wealth to all legal heirs seems to be a logical approach. However, the decision must be very practical and sensible when choosing a successor to the corner office. Age is not always a decisive indicator of ability.
So adjusting your heir to his abilities is the most impartial way to handle this emotional decision. Succession conflict occurs when there is more than one competitor to the peak. Ideally, these problems can be solved by effectively communicating, seeking outside support and involving family members. Otherwise, group decisions may fall into the table discussion.
In some cases, the heir of the administration and the heir of the owner cannot be distinguished. In fact, the successor plan of the first generation company can go hand in hand with the management heir and the rightful heir. But as generation after generation is passed down, separation of control and financial benefits may be inevitable. In many countries, these problems are usually solved by different ballot issues, but in India you can use 'trusts' to achieve the same goal. Your daughter is expected to be a beneficiary of business development but this is appropriate if she has no other option but limited participation in the day-to-day management of the business.
Another common obstacle in the subsequent planning process is the lack of talented or motivated heirs. Millionaires, or those who came after Generation X, were intelligent, practical and had a great voice. The expression of the international community expanded the boundaries of their aspirations. Their ambitions are very different from the plans chosen by the parents. In general, 6 out of 10 family business owners in India find it difficult to make the next generation a part of their current business.
Unlike previous decades, having one or two children has made this matter much more difficult. Having the right external skills to manage the business temporarily or permanently is one of the most commonly preferred strategies. This is a proven method adopted by many European and American companies. A small number of Indian families have explored this option, and many are more likely to follow their peers based on the experience of early adopters. Involving strategic partners is also part of these companies' next planning strategy.
Another major challenge in planning the next is time. Fathers are so passionate about their business that they ignore the fact that retirement is an essential part of their journey. Most leaders believe in working in the office until their last breath. There is nothing wrong with continuing the profession even after reaching retirement age, but one should change from a ‘leader’ to a ‘guide’ if Pitru is blessed with health.
It is also important that the business owner does not hesitate to pass on the management to the next generation, even if they have full ownership. While it is important for seniors to protect their own interests, it is equally important to give their heirs a sense of entitlement.
Succession planning is a very difficult task for an entrepreneur. Eventually, in a way, you give up your identity and self-esteem. Nevertheless, setting aside time to make decisions is not the best option. If the head of the family and family business owners begin to see this event as a responsibility for their business, the heir will slowly become an aviator.
